ITAT ruling: Capital gains appeal partially allowed on flat sale. Improvement costs partially approved.

The ITAT partially allowed the appeal regarding the computation of long-term capital gain on the sale of a flat and the disallowance of cost of improvement expenses. The dispute over the completion of the sale of the flat during the relevant year was resolved in favor of the revenue, as possession and full consideration were received. Regarding the improvement expenses, the ITAT directed the assessing officer to allow a partial claim of &8377;2.50 lakh out of the claimed &8377;5.76 lakh. The judgment was pronounced on 26th May 2017.

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Issues involved:
1. Computation of long-term capital gain on sale of flat.
2. Disallowance of cost of improvement expenses.

Issue 1: Computation of long-term capital gain on sale of flat:
The appeal was against the Commissioner (Appeals) order for the assessment year 2008-09. The assessing officer noted the sale of a property by the assessee based on AIR information but no long-term capital gain was declared. The assessee claimed indexed cost of improvement for renovation expenses, which was not accepted by the assessing officer. The dispute centered around whether the sale of the flat was complete during the relevant year. The assessee argued that the sale was not complete due to a default by the purchaser and legal action was taken. However, the revenue contended that the sale was complete as the possession and full consideration were received. The High Court referred the dispute to arbitration. The ITAT upheld the Commissioner (Appeals) decision as the sale was considered complete during the relevant year, dismissing the appeal.

Issue 2: Disallowance of cost of improvement expenses:
The assessee claimed expenses for improvement made in the flat in 1986, but the assessing officer disallowed the entire claim. The Commissioner (Appeals) partially allowed the claim. The assessee provided evidence of payments made for improvement work, but the assessing officer rejected the claim. During remand proceedings, additional evidence was submitted, including balance sheets from earlier years showing the cost of the flat. The Commissioner (Appeals) considered the evidence and allowed a partial claim of &8377;1.00 lakh out of &8377;5.76 lakh. The ITAT further allowed &8377;2.50 lakh as the cost of improvement and directed the assessing officer accordingly, partially allowing the appeal on this ground.

In conclusion, the ITAT partially allowed the appeal of the assessee concerning the computation of long-term capital gain on the sale of the flat and the disallowance of cost of improvement expenses. The judgment was pronounced on 26th May 2017.

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